Four Myths Freelancers Believe About Their Home-Based Business Insurance

As Millennials surpass Generation X and Baby Boomers as the largest generation in the U.S. labor force, the landscape of how, why, and where we work has changed too.

• More than 53 million Americans are freelancing either part- or full-time (Source: Freelancers Union, Sept 2014)
• 59% of established businesses in the United States operate from home. (Source: Trusted Choice, Feb 2015)
• That means that there are over 11 million home-based businesses, with 60% of those businesses not having insurance specifically recognizing or providing proper liability coverage.

While there may be a lot more freedom when it comes to entrepreneurial work and freelancing, there’s inherently more risk for which you are responsible. Here are some common thoughts and beliefs that most freelancers have whether they’re just starting out or have been independent for a while.

1. My business is too small to insure. My clients aren’t that big and the projects are too low-risk. Why would I get sued?
   1. Freelancers and small businesses often make the mistake of thinking that size is the only thing that matters when it comes to business.
   2. While you may not be a Fortune 500 company, the truth is that you are handling complex and important projects for your clients that they don’t often understand.
   3. Whenever money is exchanged, the devil is literally in the details, as the smallest molehill can become a mountain of troubles; blocking you from doing what you enjoy most.
   4. You might be great at what you do, but nobody is perfect. Protect yourself.
2. I already have homeowners insurance. It’ll provide coverage if I need it.
   1. Your standard homeowners’ policy is designed to protect you against personal exposures, not a business.
   2. The vast majority of home-based business coverage is severely limited and specifically excludes for business losses related to theft, vehicle usage, employee injury, or life/health/disability.
   3. The largest potential gap in proper coverage arises from the lack of liability protection for claims arising out of business activities, whether the claim occurs in the home or elsewhere.
3. I don’t have any employees and clients don’t come to my home. I meet them at their office or at a coffee shop. I don’t need to worry about slips and falls.
   1. Half-true. You should still have some coverage if you accept packages or deliveries for your business at your home address.
   2. If you are a consultant giving advice in your business and you make a mistake that costs a client money, you could be sued and the lawsuit could mean money out of your pocket to settle or defend against it.
      1. You should look into purchasing an “Errors and Omissions” policy to specifically cover your need.
   3. It costs too much money.
      1. If you speak to an independent agent like The Ross Maghan Agency, you may find some really inexpensive business endorsements that can cost as little as $25 to $50 per year and cover, perhaps, $2,500 worth of computer equipment and a somewhat larger amount of the slip-and-fall variety of liability insurance. These policies rarely offer any professional liability. They can be appropriate for someone who works at home for another employer.

Some Helpful Tips:

The key to dispelling these myths and getting the proper protection you need is to speak to an independent insurance broker who understands your business. They may be able to offer an umbrella policy that provides protection for both your personal and business assets; especially if you’re just starting out.

If you occasionally use your car for business purposes, it might make sense to increase your policy limit and put it under your umbrella policy.

Whatever happens, don’t allow simple safety tips and lack of due diligence to hurt your business. Invest in a good computer backup system. Inspect all smoke alarms and carbon monoxide detectors. Keep all walkways, pathways, and areas around your home clear of debris and well maintained.

The world is changing more and more each day. But one thing remains constant: the need to protect yourself and your assets.

Be sure to call The Ross Maghan Agency at (732) 566-0003 to review your current needs. The agency has been serving both businesses and individuals in the New Jersey/Pennsylvania region since 1936.

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